Urban Land Institute November 212 Make Your Move Brian Beaulieu ITR Economics
Results for 211 2 Duration Forecast Actual GDP 18 $13.525 $13.332 (-1.4%) US Ind Prod. 11 93.1 (12MMA) 93.8 (.8%) EU Ind. Prod. 11 11.1 (12MMA) 11.2 (.1%) CA Ind. Prod. 21 96. 96. (.%) Retail Sales 18 $2.116 Trillion $2.16 (-.5%) Housing 17 579 Ths Units 67 ( 4.8%) Employment 2 141.1 million 139.9 (-.9%) CPI 17 2.9% 3.2% * End of year 12-month index estimate
Results for 211 3 Country Duration Accuracy Germany 12 98.% France 18 99.9% Italy 18 99.9% United Kingdom 18 99.9% Spain 18 98.6% China 17 96.7% Japan 15 95.9% Brazil 14 96.7% EU Industries 14 94.1%
US/Global Recovery 4 Leading indicators pointing up Liquidity is not an issue Stimulative monetary policy Employment rising (companies right-sized) Banks are lending Retail Sales are rising Construction is improving Deficit spending continues
World GDP, Bils of US $, Current Prices 5 Source: IMF 69.659 Trillion US$ Percent of 211 World GDP
Real Gross Domestic Product 6 14.5 14.5 14. 14. 13.5 13.5 13. 13. 12.5 12.5 12. 12. 11.5 11.5 11. 11. 1.5 Trillions of $ '7 '8 '9 '1 '11 '12 '13 '14 '15 1.5
US Industrial Production to ITR Leading Indicator US IP 21 Indicator 21 7 14 14 7 7-7 -7-14 -21 Indicator - Monthly US IP - 12/12 '8 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-14 -21 USIP 12/12 Indicator - Monthly
Phase 1 Data Preparation 8 Raw Jan-1 1.4 Feb-1 1.5 Mar-1 1.5 Apr-1 1.4 May-1 1.5 Jun-1 1.3 Jul-1 1.3 Aug-1 1.6 Sep-1 1.6 Oct-1 1.5 Nov-1 1.7 Dec-1 1.6 Jan-11 1.7 Feb-11 1.7 Mar-11 1.7 Apr-11 1.6 May-11 1.7 Jun-11 1.5 Jul-11 1.5 Aug-11 1.9 Sep-11 1.7 Oct-11 1.7 Nov-11 1.9 Dec-11 1.7 3MMT 4.4 4.4 4.4 4.2 4.2 4.3 4.6 4.8 4.8 4.8 4.9 4.9 5. 5. 5. 4.9 4.7 4.9 5.1 5.3 5.3 5.3 3/12 14.1% 13.6% 13.2% 15.1% 13.5% 14.1% 11.3% 11.5% 1.1% 1.5% 12MMT 18. 18.3 18.5 18.6 18.8 19. 19.2 19.4 19.6 19.8 2. 2.1 2.3 12/12 12.7% 3/12 Rate-of-Change = December 211 3MMT December 21 3MMT = 5.3 1 1 = 1.5% 4.8 12/12 Rate-of-Change = December 211 12MMT December 21 12MMT 1 1 = 2.3 1 1 = 12.7% 18. 1 1
Phase 3 Generate the Quantitative Forecast 9 Internal Trends Leading Economic Indicators ITR Long Term Business Cycle Theory News and Market Observations
Output - Deliverables 1 Applicable Advice Accurate Forecasts
US Industrial Production to Gross Domestic Product 12 12 11 8 8 4 3.2% 4-4 -4-8 -12-16 -3.1% -7.1% GDP US IP -5.3% -14.6% '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-8 -12-16 Year-over-year Quarter to Quarter (3/12)
Global Industrial Production 12 Year-Over-Year Growth Rates %
US to Europe Industrial Production US 12 13 Europe 14 1 12 8 1 6 US Europe 8 4 1975 198 1985 199 1995 2 25 21 215 6 Annual Average Data Trends
Western Europe Industrial Production 14 Year-Over-Year Growth Rates %
Gross Domestic Product by State All Industry Total, 211 15 Millions of current dollars
US, Minnesota & the Plains Annual GSP Growth Rate 9 16 6 3-3 43.6% vs. 27.9%college educated -6 '98 ' '2 '4 '6 '8 '1 '12 U.S. Minnesota Plains
Unemployment Rates 17 1 9 8 7 6 5 4 3 2 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 US Minnesota
Minnesota Construction Industry Employment 18 R-O-C 12 3/12 MMA 26 8 4 12/12 4.3 4.3 24 22 2-4 18-8 16-12 3MMA 12MMA 14-16 12-2 -24 93.45 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 Thousands of Units 1 8
Minneapolis/St. Paul Construction Industry Employment 19 R-O-C 2 3/12 MMA 18 1 12/12 16-1 -1.5-4.4 14 12-2 3MMA 12MMA 1-3 8-4 -5 53.5 6 4-6 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 2 Thousands of Units
Employment Private Sector 2 12 12 115 115 11 11 15 15 1 1 95 95 9 85 Employment Mils of Jobs '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 9 85 Annual Data Trend
Unemployment Rate With and Without the Recover Plan
Total U.S. Public Debt 22 14 12 12. 14 12 1 1 8 8 6 6 4 4 2 2 192 193 194 195 196 197 198 199 2 21 22 (% of GDP)
Federal Spending Without & With Sequester Cuts Annual and Cumulative, FY 213*221 23
Surplus/Deficit as a Percentage of GDP 24
Costs by Age Categories 25
Caught in the Web Who can do what to whom 26 Federal Reserve Act of 1913 32 pages Glass-Steagall Act 37 Dodd-Frank 848 Not rules, but instructions on how to create more regulations and bureaucracies Source: The Economist
U.S. Dependence on Foreign Oil Declining Net imports as a share of domestic consumption 27 6% 6% 58% 57% 52% 49% 45%
G7 Productivity 28 Source: OECD / National Post
US Manufacturing as a % of GDP (Value Added) 29 18 18 16 16 14 14 12.2% 12 12 1 11.% '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 1 3MMA
Consumer Price Index All Items 12 3 12 9 9 6 6 3 3-3 1/12 12/12 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-3 Rates-of-Change
Velocity of Money 31 1 1 5 5-5 -2.8-5.2-5 -1-1 -15-2 1/12 12/12 '6 '8 '1 '12 '14-15 -2 Rates-of-Change
Crude Oil Futures Prices 32 15 15 125 1 75 92.19 96.17 125 1 75 5 25 RAW 12MMA 5 25 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Light & Sweet $ per Barrel, Data Trends
US Industrial Production Index Forecast Through December 214 33 15 15 1 1 5 5-5 -5-1 -1-15 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16-15 Annual Average Index
Trends 1 34 Nonresidential Construction Wholesale Trade New Orders Housing Production Financial Retail Foreign Prices Medical Soft Landing Soft Landing Hard Landing
Nondefense Capital Goods New Orders w/o Aircraft 35 R-O-C MMT 4 16 2 3/12 12/12 Feb '11 14 4.3-5. 12-2 Oct '9 1 Jul '8-4 12MMT $773.1 8-6 3MMT Nov '9 6-8 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 4 Billions of $
M2 Money Supply 36 R-O-C MMA 15 6. Oct '9 1 12/12 5.5 5 1/12 6.5 4.9 5. -5 Dec '9 Nov '1 4.3 4.5 4. -1 3.5-15 Actual 3. -2 12MMA 2.5-25 Jul '95 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 2. Trillions of 82$
Mortgage Rates to Federal Funds 22 22 37 18 18 14 14 1 1 6 6 2 Mortgage Rates Federal Funds 2-2 1975 198 1985 199 1995 2 25 21 215-2 Raw Data
US Industrial Production to Corporate Bond Prices US IP 16 Bonds 4 38 8 2-8 -2 US IP Corporate Bonds -16 1975 198 1985 199 1995 2 25 21 215-4 12/12 Rates-of-Change
US Government 1-Year Bond Yields to Municipal Bond Yields 39 1 1 8 8 6 6 4 3.73 4 2 Municipal Bonds 1.72 2 Long Term Bonds '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 Raw Data
US Leading Indicator 4 12 12 1 95.2 1 8 8 6 Actual 12MMA '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 6
Purchasing Managers Index 7 7 41 65 65 6 6 55 55 5 5 45 45 4 4 35 3 Raw '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 35 3 Raw Data
Chicago Fed National Activity Index.9.9.1 -.7 -.4.1 -.7-1.5-1.5-2.3-2.3-3.1-3.1-3.9-4.7 3MMA '7 '8 '9 '1 '11 '12 '13-3.9-4.7 3 Month Moving Average
University of Michigan Consumer Expectations Index 43 6 45 46.3 6 45 3 3 15 12.9 15-15 -15-3 -45 12/12 3/12 '7 '8 '9 '1 '11 '12 '13-3 -45 12/12 Rate-of-Change
Delinquency Rates on Consumer Loans Percentage 7. 6.5 6. 5.5 Percentage 7. 6.5 6. 5.5 44 5. 4.5 4. 3.5 3. 2.5 2. 1 Year Average 1 Year Average Consumer Loan Delinquency Rate Consumer Credit Card Delinquency Rate '9 '91 '92 '93 '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 5. 4.5 4. 3.5 3. 2.5 2. 3MMA Data Trends
Delinquency Rates for C&I Loans 16 16 45 12 12 8 8 4 4-4 -8 3/12-33.7% -41.1% 12/12 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-4 -8 3/12 & 12/12 Rates-of-Change
Retail Sales Excluding Automobiles R-O-C 14 MMT 3.5 46 7 12/12 3/12 3. 2.5 2. 2.5-7 12MMT $2.119 2. 3MMT -14 1.5-21 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 1. Trillions of 82-84$
Personal Savings 47 1 1 8 8 6 6 4 4 2 2 '8 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Billions of $, Annual Data Trend SAAR
Stock Prices Index 16 48 16 14 14 12 12 1 1 8 8 6 6 4 4 2 Raw 12MMA 1965 197 1975 198 1985 199 1995 2 25 21 215 2 Data Trends
S&P 5 to FTSE 1 S&P 5 FTSE 1 18 8 49 16 14 12 1 8 6 4 2 S&P 5 FTSE 1 7 6 5 4 3 2 1 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Data Trends
S&P 5 to S&P Toronto Stock Exchange (TSX) S&P 5 18 16 14 12 1 8 6 4 S&P TSX 16, 14, 12, 1, 8, 6, 4, 5 2 S&P 5 S&P TSX 2, '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 Data Trends
S&P 5 to Shanghai Stock Exchange Composite Index (SSEA) S&P 5 18 16 14 12 1 8 6 4 2 S&P 5 SSEA '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 51 SSEA 9, 8, 7, 6, 5, 4, 3, 2, 1, Data Trends
Existing Home Sales R-O-C 3 MMT 17 52 2 3/12 12/12 15 1 1.3 8.1 13 11-1 9-2 7-3 3MMT 12MMT 4.5 5-4 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 3 Millions of Units
Housing Starts 53 R-O-C 3 15 3/12 12/12 27.7 26.2 MMT 4.2 3.7 3.2-15 2.7-3 2.2-45 3MMT 12MMT 1.7-6 1.2-75.731.7-9 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14.2 Millions of Units
Building Permits 54 5 5 38 38 25 25 13 13-13 -13-25 -25-38 -38-5 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 U.S. Minnesota -5 12/12 Rates-of-Change
Minnesota Building Permits 55 R-O-C 1 MMT 125 5 3/12 12/12 46.5 37.1 1 75-5 3MMT 12MMT 5-1 25-15 11.28 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 Thousands of Units
Minneapolis Area Building Permits R-O-C 15 Apartment vacancy low at 2.4% and rents on the rise MMT 12 56 1 5 3/12 12/12 76.6 57.1 1 8 6-5 3MMT 12MMT 4-1 2-15 7.722 '98 '99 ' '1 '2 '3 '4 '5 ''6 '7 '8 '9 '1 '11 '12 '13 '14 Thousands of Units
US to Minneapolis/St. Paul Median Home Sale Prices 57 25 25 225 225 2 2 175 15 US Median Price Minneapolis Median Price $169.2 $158.4 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 175 15 Annual Data Trends
Minnesota Housing Price Index 58 3 3 25 25 2 2 15 15 Raw 1 1 Year over Year % Change
Housing Starts to Multi-Family Residential Construction Starts 4 3 2 1-1 -2-3 Construction 48 36 24 12-12 -24-36 -4-5 Starts Construction '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-48 -6 12/12 Rates-of-Change
US Industrial Production to Non-Residential Construction Index 155 Construction 45 6 125 35 95 25 65 Index Construction 15 35 1975 198 1985 199 1995 2 25 21 215 5 Data Trends
Architecture Billings Index 36 36 24 24 12 12-12 -12-24 -36 3/12 12/12 '98 ' '2 '4 '6 '8 '1 '12 '14-24 -36 12/12 Rates-of-Change
Private Commercial Buildings Construction to Multi-Retail Buildings Construction Commercial 3 Multi-Retail 45 2 3 1 15-1 -15-2 -3-4 -5 MSP retail : total value and mean price rising Vacancy rate about national average at 11.5% Commercial Multi-Retail '96 '98 ' '2 '4 '6 '8 '1 '12 '14-3 -45-6 -75 12/12 Rates-of-Change
Warehouse Buildings Construction R-O-C MMT 6 4 3 3/12 12/12 35-3 8.5-1.6 3 25-6 3MMT 12MMT 2-9 15-12 1-15 6.7 5-18 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Private, Billions of Dollars
Public Educational Buildings Construction to State & Local Government Expenditures Construction 4 Expenditures 8 3 6 2 4 1 2-1 -2 Construction - 12/12 Expenditures - 3/12 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14-2 -4 Rates-of-Change
Office Buildings Construction R-O-C 5 25 3/12 12/12 MSP vacancy high at 18.2%; rents expected to be rising 13.7 8.6 MMT 115 1 85 65-25 7-5 12MMT 55-75 3MMT 4-1 24.5 25-125 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 1 Billions of $
213 66
214 67
Phase Management Objectives TM 68 212-213 Recovery 1. Positive leadership modeling (culture turns to behavior) 2. Establish goals: tactical goals which lead to strategic achievement 3. Develop a system for measurement and accountability re:#2 4. Align compensation plans with #2 and #3 5. Be keenly aware of the BE (Break Even) point and check it regularly 6. Judiciously expand credit 7. Check distributions systems for readiness to accommodate increased activity 8. Review and uncover competitive advantages 9. Invest in customer market research (know what they value) 1. Improve efficiencies with investment in technology and software
Phase Management Objectives TM 69 212-213 Recovery Part 2 11. Start to phase out marginal opportunities 12. Add sales staff 13. Build inventories (consider lead time and turn rate) 14. Introduce new product lines 15. Determine capital equipment needs and place orders 16. Begin advertising and sales promotions 17. Hire "top" people 18. Implement plans for facilities expansion 19. Implement training programs
7 Must Watch Items 7 ITR Leading Indicator Housing Starts US Leading Indicator Purchasing Managers Index Retail Sales Employment Nondefense Capital Goods New Orders Available from ITR via ITR Trends Report, the ITR Advisor, or on the web
Phase Management Objectives TM 71 Phase Late C - Warning 9. Identify and overcome any competitive disadvantages 1. Make sure you and the management team are not in denial 11. Cross train key people 12. Watch Accounts Receivable aging 13. Increase the requirements for justification of capital expenditures 14. Evaluate vendors for strength (don t get caught honoring their warranties with no one to accept returned goods) 15. Manage the backlog through pricing and delivery, try to fill the funnel
Complimentary Copy of the ITR Advisor 72 Concise 4 Page Report Excellent Economic Snap Shot" Consists of Current Events, Brief Industry Segments, Snap Shot Indicators, Readers' Questions, Fed Notes, ITR Opportunity Index, and more Delivered Monthly